Jackson Hewitt Tax Service Inc. (“Jackson Hewitt”) and 5 associated debtors (the “Debtors” ) filed voluntary petitions under Chapter 11 of the Bankruptcy Code on May 24, 2011 in the Bankruptcy Court for the District of Delaware (Case No. 11-11587). This initial note provides a brief background of the Debtors based upon information in the Declaration of Daniel P. O’Brien, the Debtor’s Chief Financial Officer, filed in support of the first day pleadings (the “O’Brien Declaration”) and provides the Debtors’ consolidated list of their 30 largest unsecured creditors.

Jackson Hewitt provides computerized preparation services for federal, state and local individual income tax returns in the United States through a nationwide network of franchised and company-owned offices operating under the brand name Jackson Hewitt Tax Service. The market for paid tax preparation services is highly fragmented, with tens of thousands of paid tax return preparers throughout the country. Jackson Hewitt is the second largest paid tax return preparer in the United States, having prepared approximately 2.6 million tax returns for the 2011 tax season, which is between 3% and 4% of the total market for paid tax return preparation services.

Jackson Hewitt’s business consist of both a franchise network of approximately 700 franchisee operating 4,846 offices and tax services provided by Jackson Hewitt through approximately 1,110 company owned offices.

Secured Loans, Unsecured Creditors and Trade Debt

The Debtors explain without equivocation that they sought bankruptcy protection because they could no longer sustain their debt obligations. The O’Brien Declaration states that as of the Petition Date, the Debtors were obligated on a total of approximately $357 million in loans secured by a first priority lien on substantially all of the Debtors’ assets.

The Debtors estimate that the Company’s total “enterprise value” is between $200 million and $250 million. Based on this estimate, the O’Brien Declaration concludes that “the lenders have an unsecured deficiency claim of approximately $172 million, which makes them the Debtors’ largest unsecured creditors.”

In terms of trade debt, as of the Petition Date, the Debtors state they were “obligated on a relatively small amount of outstanding trade debt.” However, as indicated by the list of the Debtors’ largest unsecured creditors, there will be a number of landlords with claims arising due to lease rejections.

The Direction of the Case

Concurrently with the Debtors’ petitions, the Debtors submitted a plan of reorganization and disclosure statement. Under the plan, the existing equity interests will be extinguished and the former secured lenders will become the sole equity holders in the Debtors. The O’Brien Declaration goes on to explain that “[t]he Plan also provides that the Debtors will (a) reject certain unfavorable executory contracts and unexpired leases and (b) assume all of their franchise agreements with their franchisees. Holders of general unsecured claims, including the lenders, as holders of deficiency claims under the Credit Agreement, will receive no recovery.”

The Debtors’ Consolidated List of Holders of Largest Unsecured Claims

The Debtors’ have requested authority to file a consolidated list of the holders of the Debtors’ largest unsecured claims in lieu of a separate list for each of the Debtors. The consolidated list is set forth below.

The list does not include: (1) persons who come within the definition of “insider”; or (2) secured creditors, unless the value of the collateral is such that the unsecured deficiency places the creditor among the holders of the largest unsecured claims.

Bankruptcy Rule 1007(d) provides that a debtor shall file “a list containing the name, address and claim of the creditors that hold the 20 largest unsecured claims, excluding insiders.” Fed. R. Bankr. P. 1007(d). In the case of a multi-debtor filing, it is likely that many creditors are shared among certain of the debtors. This is especially the case where the debtors operate as a single business enterprise. Under these circumstances and provided that there is a request for joint administration, it is common for multiple, related debtors to request authority to file a single, consolidated list of their collective largest general unsecured creditors. These requests usually are granted by the bankruptcy court.

The Top Unsecured Creditor List is never to be considered a waiver of any defense to or “allowability” of a listed claim or an admission of the amount of any listed claim. It is common for the amount of the claims to shift and sometimes a claim that is initially is undisputed is later disputed. Creditors should always consult the official claims register.